Question

what happens in the market with an upward sloping supply curve when there is a shift in the demand curve due to an external shock?
a. a new equilibrium price will be achieved over some period of time.
b. production decisions will be unaffected.
c. price will immediately adjust to a new equilibrium.
d. price will not change.

Explanation:

When there is an external - shock induced shift in the demand curve with an upward - sloping supply curve, the market will adjust over time to reach a new equilibrium. This is because producers and consumers need time to react to the change in demand. Production decisions will be affected as producers respond to the new demand conditions. Price does not adjust immediately due to factors like price - setting behavior and market frictions.

Answer:

A. A new equilibrium price will be achieved over some period of time.